Question

__________ is calculated on both the amount borrowed and any previous interest.

• A. simple interest
• B. annual interest
• C. compound interest
• D. complex interest

Answer 1

Answer: (C)

compound interest

$\text{Compound interest}$ is calculated on both the amount borrowed and any previous interest.

Compound interest is the addition of interest to the principal sum of a loan or deposit, or in other words, interest on interest.

It is the result of reinvesting interest, rather than paying it out, so that interest in the next period is then earned on the principal sum plus previously accumulated interest. Compound interest is standard in finance and economics.

$\Rightarrow$ $C.I.=A-P$